Knowledge of options

Call Options and Put Options

There are two types of options: call options and put options.

A call option gives the buyer the right to purchase the underlying asset at a specified price, imposing an obligation on the seller to sell the underlying asset at that price.

A put option gives the buyer the right to sell the underlying asset at a specified price, imposing an obligation on the seller to buy the underlying asset at that price.

Option Premium

The option premium is the amount paid by the buyer to the seller for the option. For example, an options contract represents 100 shares of the underlying stock. If the price of the options contract is USD $1.00, the required option premium is USD $100.00.

Strike Price

The strike price refers to the predetermined exercise price.

For call options, it is in-the-money (ITM) when the price of the underlying asset is above the strike price.

For put options, it is in-the-money (ITM) when the price of the underlying asset is below the strike price.

Value Status

In-the-Money Options: If the option is in the state that can be exercised, it is considered in-the-money.

For call options, it is in-the-money when the market price of the underlying asset exceeds the strike price.

For put options, it is in-the-money when the market price of the underlying asset is below the strike price.

The option buyer hopes to have the option contract become in-the-money, while the seller hopes it becomes out-of-the-money.

Trading Hours

Typically, options trading hours are from 9:30 AM to 4:00 PM Eastern Time. However, trading hours for some ETF options contracts may extend to 4:15 PM Eastern Time.